OVERVIEW:

The Prime Minister has presented a view of the National Housing Trust that suggests to the nation that the NHT is in trouble. In my own presentation to the Budget Debate I declared that the NHT is solvent. The Prime Minister has not refuted that statement. He has increased the interest rates to NHT mortgagors and has set off a ripple effect that will have very negative impact on thousands of Jamaican families. We find that the premise upon which he has increased the interest rates has not been based on appropriate analysis of the NHT's sources of funding.

BASIS:

The Prime Minister sees the NHT primarily as a traditional lending institution. He fundamentally misunderstands the nature of the NHT. Amongst its remit is Social Investment. This includes the provision of housing solutions through mechanisms and at levels that enable low income and middle income earners to be able to purchase and own their own homes. Since its inception the Trust has provided more than 108,000 mortgages. Currently there are 74,000 active mortgagors.

• In total some 33,968 NHT mortgagors will directly suffer the negative impact of the Prime Minister's decision
• Of that number 29, 340 mortgagors pay an interest rate of 5% that will be increased to 6%
• Some 4,628 mortgagors pay an interest rate of 6% that will be increased to 8%
• This will have a correspondingly negative impact on more than 100,000 families as we must never forget that the NHT interest rates have always been the benchmark for other institutions and the interest rate for other credit facilities who are likely to increase their rates
• The Inner City Housing Programme is a stellar example of a social investment that has shown positive returns in the quality lives of the disadvantaged and the dispossessed; consistent with the mandate of the National Housing Trust.
• The Prime Minister cited several historical events in his passionate expression about believing that benefits should only go to contributors and it was meaningful that the Sites and Services Scheme that he abandoned in 1981 is now going to be revived as a Shelter Solution.

•1.      In 1981 he changed the Sites and Services Programme to a Starter Home Programme in Seaview Gardens.

•2.      The funding for that programme came from the National Housing Trust in the amount of 13 Million Jamaican Dollars - the equivalent of 10 Million US Dollars at that time

•3.       To date the majority of those loans have not repaid by the mortgagors to the NHT.

•4.      Surprisingly he has now said that he is going back to the Sites and Services Programme. When in fact he was the one who abolished the Sites and Services Programme in 1981 and made more than 150 public servants redundant

•5.      In a sense we are glad that after 28 years he has finally realized the intrinsic value of the programme and of providing shelter for the least advantaged

SOLVENCY:

Let me again address the issue of the solvency of the NHT. As I said in my budget presentation; the NHT is solvent.

• Between 2001 and 2007 the National Housing Trust has recorded a surplus except in 2006.
• That was the year when the investment of J$5 Billion Dollars was made for the Education Transformation.

We must understand that the NHT is funded through a diverse mix of sources:

• 1. Contributions
• 2. Investments
• 3. Loan Repayments
• 4. Interests on Mortgage

Indeed the NHT has earned significantly from investment in Government Paper and other high yield sources and has done well.

The balance sheet for the NHT, year ending March 2007 revealed total assets of J$89 Billion Dollars, up from J$78.6 Billion dollars the previous year.

The Prime Minister himself in Ministry Paper 28/2008 acknowledges that the NHT has total assets at the end of March 2008 of J$101 Billion Dollars; reflecting a growth of 28.5% in assets over two (2) years. As at March 2008 total liabilities amount to J$41.5 Billion Dollars. This shows a net worth for the NHT of J$60 Billion Dollars.

Again the NHT is in a positive financial position.

The finances of the NHT have provision for a $2.5 billion for subsidy to Sugar Worker Housing. This involves an agreement with the Trade Unions. The Sugar workers are contributors to the Trust. Many of them contributors from its inception. We cannot and we will never renege on our commitment to the Sugar Workers of Jamaica, to take them out of the "Barracks" and provide to them and their families with decent housing.

Measuring the NHTs Return on Investments:

• We must also understand that the NHT is not a traditional bank.
• Part of what it does in the provision of housing solutions is social investment
• In this regard the returns on investment have to be carefully measured
• The returns take the form of reduction in crime that typifies informal settlements
• The reduction to the cost of Health and Medical Attention to the state that results from caring persons who live in informal settlements
• The Inner City Housing Programme amongst other things brought people into vastly improved environments and from circumstances that were unfit for human habitation
• Beneficiaries were required to contribute to the trust prior to obtaining the benefits
• Many of these persons for the first time ever started to pay for electricity, water, telephone and other utilities
• As home owners they are now required to pay property taxes and other payments that only home owners usually pay

While the Prime Minister has criticized the Inner City Housing Programme he has proposed no alternative solution to address the need for housing in our inner cities.

CONSEQUENCES:

(1)  The proposed increase in NHT rates, as outlined by the Prime Minister would, even by itself, be a major negative for those contributors who saw the NHT as their only hope of owning their own house.

(2)  However, the proposed increase comes against the background of a 20% increase in the CPI over the last fiscal year.  The increases are not confined to discretionary expenses but include electricity and water bills, motor vehicle upkeep and food.

(3)  In the last instance, the increase over the past fiscal year was 30%.

(4)  The combination of these increases means that all middle and lower income households are using whatever savings they had put aside towards making a down-payment on simply surviving.

(5)  To make matters worse, the housing unit which last year cost $          has now moved to $          

(6)   What the PM's proposed action means is that the dream of those families to own their own little unit has become a nightmare, with higher prices for every single thing they need; their savings exhausted or soon to be; the price of the unit they hoped to own moving out of their reach and if that is not enough, the interest rate from the NHT about to be increased.

• 1. Now that the NHT rates have gone up the impact will be felt by those mortgagors who are dealing with the trust and a second entity (such as Jamaica National, VMBS, BNS)
• 2. The NHT is seen as a benchmark in the market place for interest rates. When interest rates at the NHT go down, the other institutions decrease their rates.
• 3. Conversely when the NHT interest rates go up the other institutions (Jamaica National, VMBS, BNS etc) increase their rates on mortgages as well as other credit products.
• 4. The ripple effects will also be felt by those consumers who rent houses that are owned by persons who must now pay the increased mortgages from private building societies and mortgage houses for properties bought on the open market.
• 5. For persons who benefited from and who were to benefit from the Inner City Housing Programme, the near freeze on that development represent a closing of the options for home ownership to these citizens.

CONCLUSION:

The Prime Minister has very ably documented several factors that are out of our control and have created extensive hardships on the Jamaican Consumer.

This includes rising oil prices, rising prices for imported food and other commodities.

While we are all agreed that these external factors are global in their origin and local in their impact; the hardships that can be caused by the increase in the NHT interest rates is of local origin and is unnecessary.

Consumers already faced with increased food costs, increased transportation costs, increased utilities cost, all fuelled by spiralling inflation will have their difficulties compounded by this increase and will have an obvious and equally regressive impact on rent and related expenses.

In his presentation to the nation in Parliament, the Prime Minister indicated that he will share some documents with the Opposition for review. We publicly acknowledge receipt of same.

We will carefully review those documents and will return to the nation with a fuller response to the Prime Minister.

The Jamaican consumer is assured that we will be their greatest advocate in ensuring that your interests are protected.

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